Companies World-Wide Rethink Strategies

Wednesday

Apr 29, 2009 at 12:01 AMApr 29, 2009 at 5:39 PM

Here is an interesting summary of a survey. How will this affect your business?

Consumers from the U.S. to Europe to Japan appear to be growing more cautious amid fears that the world economy will worsen over the next 12 months, according to a report to be released Thursday. The new frugality is forcing global companies to revise their strategies and offerings.

Most consumers in a Boston Consulting Group survey of 21,800 people world-wide said they are cutting spending, searching for value and discounts, and staying home more. "Our consumers are going back to basics," said Catherine Roche, a partner at the consulting firm. "They don't want to be as conspicuous as the past … avoiding visible logos on their bags and clothes."

Indeed, brand loyalty in most developed markets is waning -- so-called brand fatigue -- but remains strong in parts of Asia, according to the study conducted between October and February and then revised in March. In India and China, 79% and 71% of respondents, respectively, said brand was enough reason to pay more on a purchase, compared with 27% in the U.S. and 17% in Europe.

Still, nearly half the Chinese consumers surveyed and more than three-quarters of the Indians said they planned to at least curb spending on nonessential items. And retailers in both markets say they are trying to attract a broader customer base by lowering prices.

"I think the emerging middle class in China is brand loyal," said Alex Miller, president of Daymon Worldwide Inc., a global private-label broker and marketer for retailers, based in Stamford, Conn. "The less wealthy people are buying private label."

He cited the example of Aeon Co., Japan's biggest group retail by sales, which last month announced a new branding and discount strategy for its private labels. Aeon, Miller said, wants to achieve 750 billion yen ($7.75 billion) in annual private-brand sales by 2010.

Japan's new frugality runs counter to the brand- and quality-obsessed image it had during boom years, according to Emmanuel Huet worldwide leader of the consulting firm's Center for Consumer Insight. "Whenever as a country you live through a crisis, there are traces of it in the psyche of consumers," Mr. Huet said, referring to Japan's economic crisis in the 1990s. "The big difference is that Brazil, Russia and Mexico also have been through crises in the recent past. Not so for India and China."

Brazilians have become more price-sensitive, with about half saying they will trade down to better balance their budgets and save money. The percentage is on par with the U.S. -- but higher than in any developing country besides Mexico.

Russians, meanwhile, seem more likely to put their money into durable goods, such as appliances. "With rising inflation and a devalued ruble, they might just as well 'spend it while they have it,'" the report said.

Besides country differences, the survey found variance among consumers depending on the products. Across all Western markets, half of young single men said they don't plan to cut back spending on cars, and just under half of working couples without children said the same.

The report also hints at a shift toward products with more value and durability. Appliance maker Electrolux AB noted as much in its first-quarter earnings. "The green range is very popular all over Europe," said Electrolux spokesman Anders Edholm. "This is really something to take into consideration. When they save water and electricity, they have to take a couple of years to get return on that investment."

Source: Wall Street Journal

bob trojan

Here is an interesting summary of a survey. How will this affect your business?

Consumers from the U.S. to Europe to Japan appear to be growing more cautious amid fears that the world economy will worsen over the next 12 months, according to a report to be released Thursday. The new frugality is forcing global companies to revise their strategies and offerings.

Most consumers in a Boston Consulting Group survey of 21,800 people world-wide said they are cutting spending, searching for value and discounts, and staying home more. "Our consumers are going back to basics," said Catherine Roche, a partner at the consulting firm. "They don't want to be as conspicuous as the past … avoiding visible logos on their bags and clothes."

Indeed, brand loyalty in most developed markets is waning -- so-called brand fatigue -- but remains strong in parts of Asia, according to the study conducted between October and February and then revised in March. In India and China, 79% and 71% of respondents, respectively, said brand was enough reason to pay more on a purchase, compared with 27% in the U.S. and 17% in Europe.

Still, nearly half the Chinese consumers surveyed and more than three-quarters of the Indians said they planned to at least curb spending on nonessential items. And retailers in both markets say they are trying to attract a broader customer base by lowering prices.

"I think the emerging middle class in China is brand loyal," said Alex Miller, president of Daymon Worldwide Inc., a global private-label broker and marketer for retailers, based in Stamford, Conn. "The less wealthy people are buying private label."

He cited the example of Aeon Co., Japan's biggest group retail by sales, which last month announced a new branding and discount strategy for its private labels. Aeon, Miller said, wants to achieve 750 billion yen ($7.75 billion) in annual private-brand sales by 2010.

Japan's new frugality runs counter to the brand- and quality-obsessed image it had during boom years, according to Emmanuel Huet worldwide leader of the consulting firm's Center for Consumer Insight. "Whenever as a country you live through a crisis, there are traces of it in the psyche of consumers," Mr. Huet said, referring to Japan's economic crisis in the 1990s. "The big difference is that Brazil, Russia and Mexico also have been through crises in the recent past. Not so for India and China."

Brazilians have become more price-sensitive, with about half saying they will trade down to better balance their budgets and save money. The percentage is on par with the U.S. -- but higher than in any developing country besides Mexico.

Russians, meanwhile, seem more likely to put their money into durable goods, such as appliances. "With rising inflation and a devalued ruble, they might just as well 'spend it while they have it,'" the report said.

Besides country differences, the survey found variance among consumers depending on the products. Across all Western markets, half of young single men said they don't plan to cut back spending on cars, and just under half of working couples without children said the same.

The report also hints at a shift toward products with more value and durability. Appliance maker Electrolux AB noted as much in its first-quarter earnings. "The green range is very popular all over Europe," said Electrolux spokesman Anders Edholm. "This is really something to take into consideration. When they save water and electricity, they have to take a couple of years to get return on that investment."

Source: Wall Street Journal

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